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HMRC internal manual

International Manual

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HM Revenue & Customs
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Controlled Foreign Companies: Computation of Chargeable Profits and Creditable Tax: Effect of claim

The effect of a claim under ICTA88/SCH24/PARA9 is that a computation of chargeable profits is made for each accounting period starting with the accounting period specified in the claim. Thus, if the starting period is year 4 and the claim relates to year 1, losses of year 1 will be set first against profits of years 2 and 3 even though no direction has been made for those years.

Example

The chargeable profits of A, an overseas company, (all arising from its trade) are as follows.

Accounting period Chargeable profits/losses
   
Year to 5 April year 1 Loss £50,000
Year to 5 April year 2 Profit £20,000
Year to 5 April year 3 Profit £80,000

An apportionment is due for the year ended 5 April year 3 in which the chargeable profits are £80,000. A claim is made under ICTA88/SCH24/PARA9 in respect of the year ended 5 April year 1. As a result, the trading loss of £50,000 is brought forward and reduced by the profit of £20,000 for the subsequent year leaving £30,000 to be relieved against the trading profits for the year ended 5 April year 3.